IN THE HIGH COURT OF SOUTH AFRICA NOT REPORTABLE EASTERN CAPE, PORT ELIZABETH Case No.: A2282/2013 Date Heard: 22 August 2013 Date Delivered: 28 August 2013 In the matter between: THE OWNERS OF THE mv “SILVER STAR” Applicant and HILANE LIMITED Respondent
JUDGMENT
EKSTEEN J: [1] A writ of summons in rem against the mv “Silver Star” (herein referred to as
“the vessel”) was issued by the respondent herein on 12 August 2013. At the same
time Plasket J ordered that a warrant of arrest be issued in respect of the vessel.
The vessel was duly arrested in the port of Port Elizabeth on the same evening.
[2] In the present application the applicant seeks an order that the arrest of the
vessel be set aside, that the respondent provide security for the applicant’s claim for
damages against the respondent for the wrongful arrest of the vessel without
reasonable and probable cause and for leave to sue the respondent by edictal
citation.
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[3] The application was launched on 14 August 2013 as a matter of urgency to be
heard on 16 August 2013. In the answering affidavit filed on 16 August on behalf of
the respondent the urgency of the matter is not disputed. The deponent to the
answering affidavit on behalf of the respondent, Mr Cunningham of Attorneys
Bowman Gilfillan Incorporated, the respondent’s attorneys of record, declared that
due to the time constraints chosen by the applicant herein the answering affidavit
had been prepared in great haste which was compounded by logistical problems
arising from the fact that Attorneys Bowman Gilfillan were instructed by solicitors in
London who in turn represented clients in Hong Kong, each location in a different
time zone. He accordingly reserved the right, if necessary, to seek leave to
supplement the opposing papers in due course, in the event that the application
should not be finalised on 16 August 2013.
[4] On 16 August, by agreement between the parties, the matter was postponed
to 22 August 2013 and the respondent agreed to provide security in respect of the
delay during which the vessel would be detained and would be off-hire. The
respondent did not, however, avail itself of the opportunity to file supplementary
papers.
[5] The matter was argued before me on 22 August 2013. Although I would have
preferred more time to consider the matter I am alive to the urgency of the case and
the considerable expense incurred as a result of the vessel being held in port. In the
circumstances I have considered it necessary to give preference to this judgment.
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[6] The writ of summons in rem issued as aforesaid records the respondent’s
claim against the applicant. The respondent is a company incorporated in Hong
Kong which carries on business, inter alia, as the owner of the vessel mv “Sheng
Mu” (to which I shall refer as the “Sheng Mu”).
[7] The vessel is, a bulk carrier with a Panamanian Flag IMO no. 9512214 and a
gross tonnage of 43 830. The registered owner of the vessel is Action Partner
Limited (herein referred as “Action Partner”). Action Partner, so it is alleged in the
summons, was owned and/or controlled by Trade Line LLC (herein referred as
“Trade Line”), incorporated in the United Arab Emirates. The claims of the
respondent are alleged to have arisen in respect of the voyage charterparty entered
into between it and Trade Line, through its (Trade Line’s) subsidiary and chartering
arm Phiniqia International Shipping LLC (herein referred to as “Phiniqia”), on a
GENCON 1994 form with additional clauses, of the Sheng Mu in order to carry a
cargo of 15,271,531 MT coking coal (“the cargo”) from Bandar Abbas, Iran to Vizag,
India.
[8] Prior thereto on 20 June 2011 Golden Waves FZC, UAE (herein referred to as
“Golden Waves”) concluded an agreement of sale in terms of which it agreed to sell
the cargo to Trade Line. The respondent’s claim, it is alleged, arises in respect of
the charter of the vessel by Phiniqia and the breach by Phiniqia of its obligations,
inter alia, in terms of certain letters of indemnity issued by Phiniqia to the respondent
in respect of Bills of Lading relating to the cargo and its delivery. As a result of the
alleged breach a dispute arose between Trade Line and Golden Waves. This in turn
gave rise to further disputes between the respondent and Golden Waves and
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between the respondent and Phiniqia. Golden Waves instituted arbitration
proceedings in London against the respondent in respect of the latter’s alleged
misdelivery of the cargo in terms of Bills of Lading issued and signed by the Master
of the vessel. Golden Waves caused the Sheng Mu to be arrested in the Port of
Napier, New Zealand, as security for the arbitration which in turn caused the
respondent to suffer further damages. In order to enforce the indemnities furnished
by Phiniqia to the respondent in terms of the charterparty the respondent has
successfully prosecuted arbitration proceedings in London against Phiniqia pursuant
to which it was directed that the respondent was entitled to the enforcement of its
indemnities and to the payment of its damages in the total amount of
US$3 843 927,10.
[9] The respondent now contends that the vessel is owned and/or controlled by
Trade Line, which at the time that the plaintiff’s claim arose, also owned and/or
controlled Phiniqia, who, as the charterer of the Sheng Mu is deemed in terms of
section 3(7)(c) of the Admiralty Jurisdiction Regulation Act, 105 of 1983, (herein
referred to as “the Act”) to be its owner. In the circumstances it was alleged that the
vessel is liable in terms of section 3(6) and (7) of the Act to be arrested in an action
in rem as an associated ship to the Sheng Mu. In obtaining the warrant for the arrest
of the vessel a certificate was filed in accordance with section 4(3) of the Act in
which this contention was advanced, although very little can be gleaned from it as to
the factual basis underlying the conclusion.
[10] In the present application two issues arise. Firstly the applicant denies that
the vessel is an associated ship in respect of the respondent’s claim and secondly, in
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any event, it is argued that the respondent was not entitled to proceed with an
associated ship arrest in the circumstances of the respondent’s claim. No notice
was given in the papers filed of the foundation for this contention of law.
[11] I shall deal first with the legal issue. The legal argument raised by Mr
Gordon , on behalf of the applicant, raises the question whether the associated ship
provisions contained in section 3(6) and (7) of the Act can or do apply to a case
where an arbitration award is sought to be enforced.
[12] The respondent’s alleged cause of action is summarised above. It is the true
owner of the Sheng Mu. The respondent had a claim against Phiniqia by virtue
thereof that Phiniqia was the charterer of the Sheng Mu at the time that the
respondent’s alleged claim arose and is therefore deemed to have been the owner of
the Sheng Mu. The dispute between the respondent and Phiniqia has been
subjected to arbitration and an award has been made.
[13] Section 3(6) of the Act provides that an action in rem, other than an action in
respect of a maritime claim referred to in paragraph (d) of the definition of “maritime
claim”, may be brought “by the arrest of an associated ship instead of the ship in
respect which the maritime claim arose”.
[14] Once an award in arbitration has been made, so the argument goes, the
award itself creates a new cause of action for the enforcement thereof which
replaces the original cause of action. On this basis it is contended that there can be
no claim in rem against the vessel as the claim which the respondent’s seeks to
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enforce does not arise in respect of the Sheng Mu or indeed of any ship, but rather it
arises from an award made in arbitration as against Phiniqia.
[15] The argument is reliant heavily upon an English decision of the Queen’s
Bench Division (Admiralty Court) in “The ‘Bumbesti ”’, Lloyd’s Law Report [1999]
Vol. 2 p. 481.
[16] In The Bumbesti the issue addressed was whether the English Admiralty
Court had jurisdiction in rem to hear and determine a claim to enforce an arbitration
award made by the Constantza Court. The only basis for the court’s in rem
jurisdiction relied upon in this particular case by the claimants is section 20(2) para
(h) of the Supreme Court Act, 1981. In terms of this provision of the Supreme Court
Act the Admiralty Court has jurisdiction to hear and determine “any claim arising out
of any agreement relating to the carriage of goods in a ship or to the use or hire of a
ship”. The provision is similar to the provisions of section 1(1)(j) of the Act.
[17] The Queen’s Bench held that in English law it is clear that if a claim for
damages is referred to arbitration and the arbitration award is made for the payment
of damages this creates a new right of action for the enforcement of the award that
replaces the original cause of action. Hence it is argued that the claim which the
respondent may have had against Phiniqia in respect of the Sheng Mu has fallen
away and is replaced by a claim against Phiniqia arising from the arbitration award.
[18] I am not persuaded that the position is necessarily the same in South African
law. In Swadif v Dyke NO 1978 (1) SA 928 (A) at 944G it was held that where the
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only purpose of the judgment is to enable the creditor to enforce his right of payment
“it was realistic, and in accordance with the view of the Roman-Dutch writers, to
regard the judgment not as novating the obligation, but rather as strengthening or re-
enforcing it”. The effect thereof is that “the enforceable right remains the same.”
[19] This view was subsequently reconsidered in mv Ivory Tirupati and Another
v Badan Urusan Logistik (aka BULOG) 2003 (3) SA 104 (A) where Farlam JA
found himself unable to agree that the enforceable right remains the same. He
referred with approval to the writings of Van der Keessel, as follows:
“Having stated that it was clear that a novatio necessaria takes place on litis
contestatio, Van der Keessel said that it was equally clear that it does not
terminate the antecedent obligation or those things that were accessory to it,
such as pledges, sureties or interest.”
(See mv Ivory supra p. 115J-116A.)
[20] Farlam JA then concluded that there is nothing unusual about an obligation
being confirmed or re-enforced by the incurrence of another obligation which is in
effect an alternative to an antecedent one, such as where a cheque is given in
payment of an existing debt without any intention to novate the existing debt. (See
mv Ivory supra p.116C.) The position in the South African law, he held, is that
although the original cause of action may survive in a re-enforced and strengthened
form, a judgment (or an arbitration award) may also give rise to a new independent
cause of action enforceable between the parties in another court. The award
therefore creates an alternative obligation which exists alongside the original one.
On this basis alone I think that the judgment in The Bumbesti cannot assist.
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[21] In The Bumbesti Aikens J, having discussed the issue and various previous
decisions concluded as follows:
‘I have come to the conclusion that the answer that I must give to this question is
“no”. I think that it is not within the paragraph as a matter of construction.’
It turned, accordingly, on the construction of the particular section of the English
statute.
[22] In considering whether an award in arbitration could be said to be a claim
“arising out of an agreement relating to the use or hire of a ship” he went on to hold
that an agreement to refer disputes to arbitration is not, itself, an “agreement” in
relation to the use and hire of a ship. This, he said, is because the arbitration
agreement, whether it is the individual reference or the general agreement to refer, is
a contract that is distinct from the principle contract, i.e. the bare boat charterparty in
that case. Whilst recognising that the agreement to refer disputes which have arisen
out of a charterparty to arbitration are disputes which are indirectly “in relation to the
use or hire of a ship”, he concluded that they were not sufficiently direct so as to fall
within the ambit of the section under discussion.
[23] As stated earlier it was only one section of the English Act which was in issue
at the time. Unlike the English Act a “maritime claim” as defined in the Act includes
the provisions of section 1(1)(aa) which provides for a claim arising out of or in
relation to “any judgment or arbitration award relating to a maritime claim, whether
given or made in the Republic or elsewhere. Had the English Act contained a similar
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provision the result in The Bumbesti would clearly have been different. In any
event, whereas the arbitration award does not in South African law extinguish the
underlying cause of action as set out earlier herein, I am of the view that the
arbitration award does arise “in respect of” the Sheng Mu as envisaged in section
3(6) of the Act. That being so an action in rem against the vessel may be brought in
terms of section 3(6) of the Act. In all the circumstances I am of the view that the
argument must fail.
[24] I turn to consider whether the vessel is an associated ship to the Sheng Mu in
respect of the respondent’s claim. Mr Norton, an attorney of Edward Nathan
Sonnenbergs (herein referred to as “ENS”) deposed to the founding affidavit on the
strength of information provided to him, predominantly one Captain Rathee, who is
described in the papers as the CEO of Stellar Ocean Transport LLC (herein referred
to as “Stellar Ocean”), which concern according to Rathee is the technical and
commercial managers of the vessel.
[25] Norton confirms that Action Partner is the registered owner of the vessel. The
applicant takes the position that Action Partner is a special purpose vehicle in which
one Ahamed Mubarak Habeeb (herein referred to as “Habeeb”) is the sole
shareholder. Norton records that Rathee has advised that Habeeb has confirmed to
him that he is not a nominee shareholder and that he holds the shares for his own
account. Habeeb, so it is contended, is accordingly the beneficial owner of the
vessel and it is strenuously denied that Trade Line owns or controls the applicant in
any manner. In support of these averments Action Partner annexed the official
certificate of incorporation and its annual return to the papers.
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[26] Initially no confirmatory affidavit was filed either by Habeeb or by Rathee,
however, on 16 August, albeit belatedly, both filed confirmatory affidavits together
with the applicant’s replying affidavit. I shall revert to these below.
[27] The respondent set out the basis for its claim relating to the association of the
vessel fully, for the first time, in its answering affidavit. It accepts, as is apparent
from the summons in rem, that the registered owner of the vessel is Action Partner
and that Action Partner is a one ship owing a company. It contends, however, that
the vessel is group owned by Trade Line. Habeeb is the vice chairman of Trade
Line. The respondent records that according to Lloyd’s List Intelligence on Action
Partner and the vessel and according to the reports by Sea-Web, both of which were
annexed to the papers, Stellar Ocean is the ship manager and beneficial owner of
the vessel and Stellar Shipping is the operator of the vessel. Both Stellar Ocean and
Stellar Shipping are, according to these sources, subsidiaries of Trade Line.
[28] Against this background the respondent contends that on 7 June 2011 Stellar
Shipping, then the owner of the vessel purported to sell the vessel to Action Partner
for US$49 800,00. A Bill of Sale is annexed in support hereof. Four months later,
however, on 18 October 2011, Action Partner entered into a mortgage agreement
with Emirates NDB Bank in terms of which it mortgaged the vessel in favour of the
bank as security for a loan in the amount of US$40 600 000,00 to Stellar Shipping.
The amount was advanced to Stellar Shipping, in accordance with the facility (loan)
agreement, which the respondent contends is usually used to pay for the purchase
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price of the vessel either in part or in full. The actual borrower, as is evident from the
mortgage agreement, so the respondent contends, was Stellar Shipping.
[29] In respect of Habeeb’s position the respondent acknowledges that he is the
sole shareholder in Action Partner. Respondent contends, however, that Habeeb
acquired the shares in Action Partner on 8 June 2011, the day after the signature of
the Bill of Sale and the delivery of the vessel to Action Partner. It is contended
therefore that in order for Habeeb to have acquired the shareholding he must have
made payment to the value of the vessel given that Stellar Shipping had borrowed
the funds to pay the majority of the purchase price, approximately
US$50 000 000,00. Habeeb, it is contended on the strength of a Linkedin profile
obtained, completed his schooling in 2004, graduated with a BCom degree at
Madras University in 2007 and commenced work as a project co-ordinator in 2008
after completion of a MBA at Anna University. He has subsequently been employed,
so it is alleged, as a relationship officer, business development manager, marketing
director and coal trader since 2009 and has worked for Trade Line facilitating “coal
shipment successfully over the past five years for Trade Line LLC …”.
[30] Reliant on the information obtained from the Lloyd’s List Intelligence and the
Sea-Web Report, the circumstances of the Emirates NDB Bank loan to Stellar and
the alleged youthfulness of Habeeb the respondent contends that, in the absence of
evidence as to how Habeeb paid for the acquisition of shares in an entity owning a
vessel worth US$50 000 000,00 the probabilities are that he holds the shares on
behalf of Stellar Shipping and/or Trade Line and that the purported sale of the vessel
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to Action Partner is nothing more than a simulated transaction to give the impression
that the vessel is no longer owned by Stellar Shipping.
[31] The respondent states, and it is not in dispute, that Habeeb holds a 25% share
in Trade Line and is described in the company profiles from the Dubai Chamber of
Commerce as a “partner”. One Al Ghurair holds a 51% share in Trade Line and is
described in the said profiles as “managing partner”. Habeeb holds a 19% share in
Stellar Shipping and is described as “managing partner” in the said profiles. Al
Ghurair holds a 51%share in Stellar Shipping and is also described as a “managing
partner” in the said profiles.
[32] In its replying papers the applicant paints a very different picture. The
replying affidavit was deposed to Ms Pitman on the strength of information passed to
her by Habeeb and Rathee.
[33] In respect of Habeeb the applicant admits his shareholding in Stellar Shipping
and Trade Line as well as the position which he holds as “vice chairman” in Trade
Line. Habeeb, a Belgium citizen, however, is stated to be 60 years of age and a
successful businessman of many years standing with interests in diamond trading,
real estate, construction, restaurant business and shipping. It is accordingly denied
that he fits the profile attributed to him by the respondent. In support hereof he has
annexed a copy of his Belgium passport which bears out his citizenship and age.
These averments the respondent cannot dispute and they must be accepted.
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[34] His shipping interests are said to be varied. Some investments are entirely
his own and others are through shareholding purchased in the shipping vehicles of
others. His investments in the Al Ghurair Group fall into the latter category.
[35] In respect of Stellar Ocean it is alleged that Habeeb entered into the shipping
industry for his own account in 2008. He decided to start his own ship management
company, being Stellar Ocean. The use of the name “Stellar”, it is contended, is
quite popular in the shipping industry around the world and so it is suggested that the
similarity in name to Stellar Shipping is purely coincidental.
[36] Stellar Ocean was incorporated in the United Arab Emirates. In accordance
with the law of this country it is necessary for any local company to be sponsored by
a citizen of the UAE who must own at least 51% of the shares. In the circumstances
it is stated that although Stellar Ocean was started and managed by Habeeb it was
necessary for a local sponsor to hold 51% of the shares in the company. Such
shareholding was not nominal and the local citizen must hold the shares for his own
account which, it was alleged, was indeed what occurred in the case of Stellar
Ocean. In the case of Stellar Ocean one Ahmad Salam Ahamd Darwish was the
sponsor. Habeeb held a 23% shareholding in the company which he managed, until
he sold his interests in the company. The answering papers are silent as to when
Habeeb is alleged to have sold his shares or to whom he had sold them. In a
supplementary replying affidavit, to which I shall revert later it is contended that
Habeeb sold his shares in Stellar Ocean in 2012. In the supplementary affidavit,
however, the confidentiality as to the identity of the purchaser remains intact.
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[37] The interests of Habeeb in the Al Ghurair Group are admitted. It is stated that
Habeeb is a shareholder in the group and is aware of the fact that Trade Line, Stellar
Shipping and Phiniqia are and always have been controlled as to 51% shareholding
by Al Ghurair. He denies, however, that Stellar Shipping and Phiniqia are
subsidiaries of Trade Line and avers that Al Ghurair independently controls all three
companies through his shareholding.
[38] In respect of the company structures the applicant contends that Action
Partner was a special purpose vehicle which had previously owned another vessel,
the beneficial owner thereof was Abu Dhabi National Leasing LCC. The vessel had
been sold and during 2011 the company was dormant. In these circumstances the
dormant company was offered to Habeeb and the shares were duly transferred to
him on 8 June 2011 for no consideration. The applicant records that it was later
established that the transfer of two of the three shares in Action Partner had
mistakenly not been transferred to him on 8 June 2011 due to an administrative error
which was subsequently corrected on 25 November 2011. The company owned
nothing of value other than the vessel which had been paid for, so it is contended, by
Habeeb.
[39] Stellar Ocean, the applicant contends, is the commercial and technical
manager of the vessel and is not a subsidiary of Trade Line. Pitman states that since
Habeeb had sold his shares in Stellar Ocean there is no common shareholding
between Trade Line and Stellar Ocean.
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[40] Stellar Shipping too, it is alleged, is not a subsidiary of Trade Line although Mr
Al Ghurair is a 51% shareholder in both companies and Stellar Shipping has nothing
whatsoever to do with the vessel which is operated by Stellar Ocean. In the
circumstances it is denied that the vessel is group owned by Trade Line.
[41] Turning to the sale of the vessel. The applicant contends that there were two
Bills of Sale in respect of the vessel, one from the shipyard to Stellar Shipping and
one dated 7 June 2011, which was annexed to the respondent’s affidavit, from
Stellar Shipping to Action Partner. The applicant explains that during or about 2008
Trade Line, Phiniqia and Stellar Shipping were badly affected by the economic
downturn. Stellar Shipping had a number of new-buildings on order from various
shipyards. The vessel was one such and her price being approximately
US$50 000 000,00. Stellar Shipping had arranged a loan of US$40 600 000,00 from
Emirates NDB Bank and the remaining amount of approximately US$9 500 000,00
was payable by Stellar Shipping to the shipyard. Stellar Shipping was no longer in a
position to honour its obligations and to pay the US$9 500 000,00.
[42] In these circumstances Habeeb resolved to purchase the vessel personally.
He arranged for Stellar Ocean to pay the US$9 500 000,00 margin to Stellar
Shipping. The sale was then concluded on 7 June 2011, the shares in Action
Partner, save to the extent set out above, were transferred to Habeeb on 8 June
2011 and the vessel registered in the name of Action Partner on 9 June 2011. The
loan which had been arranged by Stellar Shipping, so it is contended, was duly
granted and paid to Action Partner and the mortgage registered in the name of
Action Partner, initially on 29 June 2011 and, after the mortgage documents became
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available, then on 19 September 2011. The applicant categorically denies that
Stellar Shipping was the borrower. The applicant contends that, although the facility
letters were concluded between Stellar Shipping and the bank, before the loan was
granted Stellar Shipping encountered financial difficulties and could not continue with
the loan. Habeeb agreed to step in and to buy the vessel and the loan of
US$40 600 000,00, was advanced not to Stellar Shipping but to Action Partner.
[43] In order to bolster this claim it is alleged that it is very well known that
mortgagee banks go to some lengths to ensure that if a group company is taking a
loan the main companies of the group stand as guarantors for that loan. In the
present case it is alleged that the loan documentation does not mention Trade Line,
Stellar Shipping or Phiniqia. This in itself, it is argued, is a telling fact that such
companies were not related to Action Partner.
[44] I alluded earlier to the confirmatory affidavits filed by Habeeb and Rathee.
Habeeb in his confirmatory affidavit confirms his personal circumstances, his
Belgium citizenship and his business interests. He confirms that he is the sole
shareholder of Action Partner and that he holds those shares for his own account
and not as nominee. He states that Trade Line does not own or control Action
Partner and he confirms that Stellar Ocean is the technical and commercial manager
of the vessel. Habeeb specifically limits his confirmation to these issues and does
not confirm any facts relating to the sale of the vessel or the circumstances
surrounding either the sale or the loan.
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[45] Rathee, for his part, confirms that the facts and allegations in the affidavit filed
by Ms Pitman are correct and that he had conveyed these to Norton. In particular he
confirms that he is personally aware of the facts relating to the purchase of the
vessel by Habeeb as Stellar Ocean, he says, handled the transaction for him. He
continues to record that he is aware of the fact that Habeeb was offered and
accepted Action Partner as a vessel to own the vessel and that he personally paid
the margin for the vessel out of his own funds. Stellar Ocean then arranged for him
to transfer the vessel to Action Partner, the balance of the purchase price being
funded by the mortgagee bank.
[46] Rathee continues to confirm that he had personal knowledge of the fact that
Habeeb is certainly no nominee and that Stellar Ocean trades the vessel. His
confirmation of personal knowledge in respect of the capacity in which Habeeb holds
the shares is, of course, at variance with the averments made by Norton in the
founding affidavit to which I have referred above. In that instance Norton recorded
that Rathee had advised him that Habeeb had informed him that he holds the shares
in his personal capacity.
[47] Following on in the replying papers the respondent called for delivery of the
facility letters dated 26 July 2010 and 7 September 2010 respectively, which are
referred to in the mortgage document dated 18 October 2011. These documents
show conclusively that the true borrower of the US$40 600 000,00 from Emirates
NDB Bank was indeed Stellar Shipping. Moreover the documentation reveals that
Trade Line and the shareholders of Trade Line and Stellar Shipping were indeed
required to stand as guarantors for the loan. The documents were clearly
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destructive of the case advanced in the replying papers in respect of the loan and
the payment of the US$49 800 000 to Stellar Shipping as reflected in the Bill of Sale
dated 7 June 2011.
[48] These circumstances prompted the applicant to file a further affidavit by
Rathee. Rathee confirms that he had provided the information to ENS which was set
out in the affidavit of Ms Pitman. He states that some of the information contained in
the affidavit of Ms Pitman fell within his own personal knowledge whilst others,
predominately the information personal to Habeeb were provided to him by Habeeb
and relayed to ENS Attorneys.
[49] After Ms Pitman’s affidavit had been drafted by ENS the replying affidavit was
forwarded to him and he confirms that he went through the affidavit and advised that
the facts contained therein were correct and could be deposed. I pause to mention
that Rathee does contend that it occurred in some haste.
[50] Rathee then proceeds to state that, on re-reading the replying affidavit he
noted a number of “inaccuracies” which he seeks to correct in his further affidavit.
Significantly, Rathee now seeks to deny that he had intimated that Trade Line and
Stellar Shipping had not been required to stand as group guarantors for the loan
from Emirates NDB Bank and he confirms that Stellar Shipping was indeed the real
borrower. I pause to mention that Ms Pitman is a respected officer of the court and I
have no doubt that her affidavit was prepared with meticulous care. In seeking to
explain the error in his earlier instructions Rathee records as follows:
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“I understood this paragraph to be making the point that neither Trade Line nor
Stellar Shipping were guarantors of Action Partner Limited’s commitment under
the ship’s mortgage agreement. Clearly a cursory read of paragraph (b) of the
preamble to the mortgage at page 117 of the papers makes it clear that Stellar
Shipping is the borrower from the bank. I believed that EMS had grasped this
point and I believe that I was reading these papers as if this point had been
understood and was being confirmed, not the opposite, as I subsequently
understood to be the case.
In fact, as is clear from the facility letter that has been provided to the respondent
as a consequence of its request for it, Stellar Shipping remains the borrower and
there are indeed corporate and personal guarantees in place from Trade Line
and the Stellar Shipping shareholders. The guarantees are for the performance
of Stellar Shipping, not Action Partner Limited for its commitment in terms of the
mortgage agreement.”
[51] The inescapable conclusion to be drawn from this is, of course, that Stellar
Shipping borrowed an amount of US$40 600 000,00 from the bank in order to pay
the purchase price of the vessel to Cosco. Guarantees were required in respect of
the loan from Trade Line and Stellar Shipping and their shareholders and Stellar
Shipping remains liable to the bank in respect of the loan.
[52] Realising this difficulty Rathee set out a very different case in the
supplementary affidavit. He confirms, as emerges from the original facility letter from
the bank that the vessel was to be owned by Stellar Shipping and was to be
registered in the name of Stellar Shipping. The guarantees were required from
Trade Line and the shareholders of Trade Line and Stellar Shipping, including
Habeeb, and the original facility letter was signed for Stellar Shipping by Al Ghurair,
the majority shareholder in Stellar Shipping.
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[53] Rathee re-iterates the negative effects which Stellar Shipping had
encountered as a result of the economic downturn and states that Stellar Shipping
had failed to make payments due under its contract with the shipyard in respect of
the purchase of the vessel. The shipyard accordingly cancelled the agreement on
21 October 2010. A copy of the letter of cancellation is annexed. Astoundingly, the
letter is addressed to Stellar Shipping Company: Attention Captain AK Rathee.
Rathee’s association with Stellar Shipping remains unexplained. In any event, he
proceeds to record that Cosco later agreed to continue in the contract.
[54] He states that Emirates NDB Bank called upon Stellar Shipping to pay the
margin monies which Stellar Shipping was unable to do. Stellar Shipping
accordingly approached the shareholders to ascertain whether any of them would be
prepared to take over the transaction against payment of the margin monies. The
reason for doing so was, that Stellar Shipping calculated that if the transaction was
not pursued it was at risk of losing in the region of US$15 000 000,00 in damages to
the yard. It was for that reason, it is alleged, that Stellar Shipping was prepared to
continue to act as borrower to facilitate the continuation of the existing facility
agreement for the benefit of a third party and the guarantors were prepared to
continue to act in that capacity for the same purpose. Habeeb then took over the
transaction. The terms upon which Habeeb did so are alleged to be those set out in
a letter which is annexed to his supplementary affidavit. Rathee’s states that
Habeeb agreed to these terms. The letter referred to purports to be a letter from
Trade Line to Habeeb. It confirms that in principle Emirates NDB Bank, Trade Line
and Stellar Shipping were agreeable to extend the loan facility to Habeeb. It was
necessary however for Habeeb to confirm a number of pre-conditions set out in the
21
letter, including that he would indemnify Trade Line, Stellar Shipping and the
shareholders of any liability associated with the finance of the vessel. Habeeb has
filed no confirmatory affidavit in respect of these terms and it is not alleged that such
an indemnity was forthcoming.
[55] In any event, Rathee continues to state that Habeeb then made arrangements
to pay the margin of US$9 500 000,00 to the shipyard. He did so by arrangement
with Habeeb’s brother, Mujeerbur Rahman Habeeb by using the proceeds of the sale
of the mv “Majestic Star” a vessel owned by a company known as Stellar Mini
Bunkers Hong Kong Limited. The sole shareholder of this company was Habeeb’s
brother. The payment was arranged by Stellar Ocean who as manager of the mv
“Majestic Star” then controlled those funds on behalf of Stellar Mini Bunkers Hong
Kong Limited to Stellar Shipping. The balance of the margin, Rathee states, was
paid by Stellar Ocean to Stellar Shipping from funds that were owed by Stellar
Ocean to Habeeb as a shareholder. In support of this contention he annexes a copy
of a document which had not been provided previously and which he contends
proves this payment. The document is on a letterhead of Stellar Ocean dated
6 November 2010. It is addressed to National Bank of Abu Dhabi and requests the
transfer of the amount of US$5 000 000,00 to Stellar Shipping. It is signed on behalf
of Stellar Ocean by Habeeb. In respect of payment details the document records:
“Transfer to sister concern”
[56] Rathee now denies that this inscription conveys that Stellar Ocean and Stellar
Shipping were commonly controlled. He states that the terminology was chosen
22
merely because Habeeb was a common shareholder in the two companies at the
time. Habeeb, however, is silent in this regard.
[57] No explanation is tendered for why Habeeb has not made a confirmatory
affidavit in respect of these events and, as earlier alluded to, the applicant has not
taken the court into its confidence in respect of who Habeeb had alienated his
shares in Stellar Ocean to.
[58] In this regard there is a further aspect which arises from Rathee’s
supplementary statement. Rathee states that he erred in his original instructions to
Ms Pitman and that he was incorrect in suggesting that it was not possible to have a
citizen of the United Arab Emirates sponsor a company by holding 51% shareholding
for a fee, without any participation, financial or otherwise in respect of the company.
In the case of Stellar Ocean, he now states that Darwish was indeed such a sponsor
and confirms that the company was, until 24 September 2012 controlled by Habeeb.
The 51% shareholding which Darwish held in the company, on my understanding of
this allegation, was accordingly held as a nominee. Habeeb controlled the majority
shareholding in Stellar Ocean up until 2012. This being so the purchaser of
Habeeb’s shareholding would have obtained control of Stellar Shipping.
[59] It is trite that a dispute of fact on issues which arise in motion proceedings are
to be approached in line with what was stated in Plascon-Evans Paints Ltd v Van
Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 634H-635C. There Corbett JA,
as he then was, stated:
23
“It is correct that, where in proceedings on notice of motion disputes of fact have
arisen on the affidavits, a final order, whether it be an interdict or some other
form of relief, may be granted if those facts averred in the applicant's affidavits
which have been admitted by the respondent, together with the facts alleged by
the respondent, justify such an order. The power of the Court to give such final
relief on the papers before it is, however, not confined to such a situation. In
certain instances the denial by respondent of a fact alleged by the applicant may
not be such as to raise a real, genuine or bona fide dispute of fact … If in such a
case the respondent has not availed himself of his right to apply for the
deponents concerned to be called for cross-examination under Rule 6 (5) (g) of
the Uniform Rules of Court … and the Court is satisfied as to the inherent
credibility of the applicant's factual averment, it may proceed on the basis of the
correctness thereof and include this fact among those upon which it determines
whether the applicant is entitled to the final relief which he seeks … Moreover,
there may be exceptions to this general rule, as, for example, where the
allegations or denials of the respondent are so far-fetched or clearly untenable
that the Court is justified in rejecting them merely on the papers …”
[60] In Bradbury Gretorex Co. (Colonial) Ltd v Standard Tra ding Company
(Pty) Ltd 1953 (3) SA 529 (W) at 531A-D Steyn J pointed out that an applicant
cannot by obtaining ex parte an order in his favour secure a more advantageous
position than he would have been in if the other party had had an opportunity of
putting counter allegations before the court; consequently, if the other party applies
for setting aside the order, the original applicant retains the onus of satisfying the
court that he was entitled to it. This approach, in a matter such as the present, was
approved in the Appellate Division of the Supreme Court (as it then was) in the
matter of Cargo Laden on Board the mv Thalassini Avgi v mv Di mitris 1989 (3)
SA 820 (A). In argument before me counsel were correctly in agreement that for
purposes of the application of the approach set out in Plascon-Evans Paints supra,
24
the respondent, who retains the onus to establish his entitlement to the arrest of the
vessel, should be regarded as the applicant.
[61] Adopting this approach the following which emerges from the affidavit on
behalf of the applicant must be accepted. Firstly, Al Ghurair owns 51% of the
shareholding in Trade Line, Stellar Shipping and Phiniqia. Al Ghurair accordingly
controls these companies. Habeeb is the vice chairman of Trade Line and is a
shareholder in the group of companies owned by Al Ghurair. Stellar Ocean is the
technical and commercial manager of the vessel.
[62] On the version of the applicant Habeeb owned the majority shareholding in
Stellar Ocean (23% in his own name and 51% via Darwish) until he sold his
shareholding on 24 September 2012. Habeeb accordingly controlled Stellar Ocean
until September 2012.
[63] The reports of Sea-Web and Lloyd’s List Intelligence upon which the
respondent relies reflects Stellar Ocean currently to be a subsidiary of Trade Line.
This the applicant denies and states that since Habeeb sold his shareholding in
Stellar Ocean there has been no common shareholding between Stellar Ocean and
Trade Line. I think that the two features of this denial are of particular significance.
Firstly Habeeb, although he made a confirmatory affidavit which was filed together
with the replying affidavit limits his confirmation to particular issues and astutely
avoids confirmation of any of the averments made in respect of his shareholding
Stellar Ocean. The second significant feature hereof is that the applicant refrains
from taking the court into its confidence in respect of the identity of the purchaser of
25
Habeeb’s shareholding. This is clearly a matter which falls within the knowledge of
Habeeb. In the absence of this information I do not think that the denial can raise a
genuine dispute of fact. The application accordingly falls to be decided on an
acceptance that Stellar Ocean is a subsidiary of Trade Line.
[64] The association between Stellar Shipping and Stellar Ocean emerges further
from certain of the annexures annexed to the supplementary affidavit provided by
Rathee. I have alluded above to the letter from Cosco Shipyard Co. Ltd which
purports to cancel the agreement for the construction of the vessel. It was
addressed to Stellar Shipping Company for attention Captain Rathee. This
association between Rathee, the CEO of Stellar Ocean, and Stellar Shipping is not
explained by Rathee at all. In addition the explanation for the description of Stellar
Shipping as a “sister concern” of Stellar Ocean in a document signed by Habeeb,
which I have referred to above is, in the absence of a confirmatory affidavit by
Habeeb not convincing. I think it is clearly untenable.
[65] On a consideration of all these matters I think that the dispute arising in
respect of the control of Stellar Ocean, to the extent that it might be material, is not a
real, genuine or bona fide dispute of fact as was envisaged in Plascon-Evans
Paints supra.
[66] In the answering affidavit the respondent took the position that Habeeb holds
the shares in Action Partner as a nominee on behalf of Stellar Shipping and/or Trade
Line and in addition that the purported sale of the vessel by Stellar Shipping to
Action Partner is nothing more than a simulated transaction in order to give the
26
impression that the vessel is no longer owned by Stellar Shipping. In the event that
the sale was a simulated transaction, then it follows as a matter of logic that the
vessel remains the property of Stellar Shipping which is part of the group of
companies owned and/or controlled ultimately by Al Ghurair. By virtue of the
conclusion to which I have come in respect of the sale I do not think that it is
necessary to address the question of the capacity in which Habeeb may hold the
shares.
[67] It is not in dispute that the construction of the vessel was commissioned by
Stellar Shipping from Cosco Shipyard in China. A Bill of Sale was concluded
between Stellar Shipping and Cosco. Thereafter, a second Bill of Sale was
concluded between Stellar Shipping and Action Partner, dated 7 June 2011. The
actual terms upon which the vessel was sold by Stellar Shipping to Action Partner
have not been disclosed. The Bill of Sale records only that Stellar Shipping
acknowledges that it transfers 100% of the shares in the vessel to Action Partner for
an amount of US$49 800 000,00 which it records has been paid by Action Partner
and received by Stellar Shipping. Pitman, in the replying affidavit records that the
only asset which Action Partner had in June 2008 was the vessel which had been
paid for by Habeeb. The applicant’s case was clearly that the full purchase price
was paid to Stellar Shipping and that Action Partner had obtained US$40 600 000,00
on loan from Emirates NDB Bank.
[68] On the evidence which emerges from the affidavits it cannot be gainsaid that
Habeeb caused the margin amount of US$9 500 000,00 to paid to Cosco. In the
replying affidavits it is contended that the loan which had been arranged by Stellar
27
with Emirates NDB Bank was then advanced to Action Partner and Action Partner
was the actual borrower of the amount. This accounts for the remaining
US$40 600 000,00 which was allegedly paid to Stellar Shipping. It was categorically
and firmly denied that Stellar Shipping remained the actual borrower.
[69] The mortgage documentation, which was signed on 18 October 2012, some
months after the Bill of Sale, read together with the facility letters referred to in the
mortgage bond and which were not forthcoming before respondent called for them,
show unequivocally that this is not true.
[70] In terms of the mortgage bond Action Partner agreed to secure the liability of
Stellar Shipping to the mortgagee. The mortgage provided that in the event of a
breach of the loan agreement by Stellar Shipping the vessel could be sold in order to
liquidate the outstanding indebtedness of Stellar Shipping. It further provided that
the secured indebtedness shall at the election of the mortgagee become immediately
due and payable if one of the events of defaults mentioned in the loan agreement
occurs.
[71] On this basis it is argued, and I think correctly, that it is clear that Action
Partner put up its alleged vessel as security for the loan indebtedness of Stellar
Shipping. Clearly the US$40 600 000,00 borrowed under the loan agreement was
utilised by Stellar Shipping to pay Cosco Shipyard for the purchase of the vessel.
[72] As recorded earlier Habeeb caused the margin amount to be paid. In order to
do so it required the sale of a vessel owned by his brother. On the replying papers,
28
however, no explanation can be given as to how the remaining amount of
approximately US$40 000 000,00 which was allegedly paid to Stellar Shipping, as
recorded in the Bill of Sale, was paid.
[73] After the facility letters came to light it became clear that the version relating
to the loan agreement which had been firmly advanced by the applicant in the
replying papers was simply not true. The endeavour of Rathee to explain the reason
for his incorrect instructions is, in my view, untenable and Habeeb has refrained from
providing any confirmation in respect of the events relating to the loan agreement,
the facility letters or the mortgage bond, notwithstanding that he personally signed
the mortgage bond and provided a personal guarantee in respect thereof. Once it is
accepted, as I think that it must be, that the loan from the Emirates NBD Bank was
utilised to pay Cosco Shipping then the conclusion is inescapable that the Bill of Sale
dated 7 June 2011, which records and confirms that the purchase price of
US$49 800 000,00 has been paid by Action Partners to Stellar Shipping, must be a
simulation.
[74] In all the circumstances I do not think that there is a genuine, or bona fide
dispute of fact about the validity of the purported sale and in the premises I conclude
that the vessel remains the property of Stellar Shipping, which, it common cause,
falls within the companies owned by and/or controlled by Trade Line or Al Ghurair.
The vessel is accordingly an associated ship in respect of the respondent’s claim.
[75] I turn to consider the relief sought in respect of security for the alleged
wrongful arrest of the vessel. The onus in this regard rests upon the applicant and,
29
applying the test set out in Plascon-Evans Paints , to which I have referred earlier,
the averments made by the applicant and which have been admitted by the
respondent together with the facts alleged by the respondent should be considered.
[76] I think that it follows from the conclusions to which I have come above that the
applicant has not made out a case upon which it can be held that the arrest of the
vessel at the instance of the respondent was without reasonable and probable
cause.
[77] No argument was presented to me in respect of the relief sought relating to
edictal citation and I shall accordingly make no finding in that regard.
[78] In the result I make the following order:
1. The application to set aside the arrest of the mv “Silver Star” is dismissed.
2. The application for security in respect of a claim for damages against the
respondent for the arrest of the mv “Silver Star” without reasonable and
probable cause is dismissed.
3. The security provided by the respondent in respect of the postponement on
16 August 2013 is to be released to the respondent.
4. The applicant is to pay the respondent’s costs occasioned by the application.
30
_________________________
J W EKSTEEN
JUDGE OF THE HIGH COURT
Appearances:
For Applicant: Adv D A Gordon SC instructed by Edward Nathan Sonnenbergs
c/o Pagdens Attorneys, Port Elizabeth
For Respondent: Adv M J Fitzgerald SC instructed by Bowman Gilfillan Inc c/o
Chris Baker Attorneys, Port Elizabeth